Safe and Sound

Crossroads Bank

Effingham, IL

5

Star Rating

Crossroads Bank is an FDIC-insured bank started in 1974 and currently based in Effingham, IL. The bank holds equity of $21.7 million on $161.7 million in assets, according to December 31, 2017, regulatory filings.

With 25 full-time employees in 2 offices in IL, the bank currently holds loans and leases worth $119.4 million, including real estate loans of $94.2 million. U.S. bank customers currently have $136.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Crossroads Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three major criteria Bankrate used to score American banks on safety and soundness.

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for depositors when a bank is experiencing financial instability. It follows then that when it comes to measuring an an institution's financial fortitude, capital is crucial. From a safety and soundness perspective, more capital is better.

Crossroads Bank racked up 18 out of a possible 30 points on our test to measure capital adequacy, exceeding the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Crossroads Bank's Tier 1 capital ratio was 16.35 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial downturns.

Overall, Crossroads Bank held equity amounting to 13.45 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these kinds of assets may eventually force a bank to use capital to absorb losses, shrinking its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and increasing the risk of a failure in the future.

On Bankrate's test of asset quality, Crossroads Bank scored 40 out of a possible 40 points, better than the national average of 37.49 points.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.01 percent of Crossroads Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Crossroads Bank's loan loss allowance was 9,041.67 percent of its total noncurrent loans, above the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's ability to earn money affects its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or use them to deal with problematic loans, likely making the bank better able to withstand economic trouble. Banks that are losing money, however, have less ability to do those things.

Crossroads Bank scored 14 out of a possible 30 on Bankrate's earnings test, less than the national average of 15.12.

One important way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. Crossroads Bank's most recent annualized quarterly return on equity was 6.85 percent, below the national average of 8.10 percent.

The bank earned net income of $1.5 million on total equity of $21.7 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.92 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.

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